Medicare Set Aside Accounts (MSA) and Personal Injury Claims

Attorneys and claim representatives need guidance to advise clients and comply with Medicare’s demands. This article discusses the ramifications of a recent federal decision,Aranki v. Burwell, as well as other federal and state cases on personal injury settlements when dealing with the issue of the potential need for MSAs for future medical expenses.

History

Until 1980, Medicare was the primary payer for all services covered by Medicare except those covered by workers’ compensation. In 1980, in an effort to shift costs from the Medicare program to private payers, Congress enacted the Medicare Secondary Payer Act (MSPA), 42 U.S.C. § 1395y(b), which made Medicare a secondary payer to certain plans, including liability insurance. Regulations implementing the “nuts and bolts” of the MSPA have been codified at 42 C.F.R. Part 411. As the secondary payer, Medicare provides coverage for any amount not covered by a primary payer or primary plan. Under the MSPA, a primary payer includes a tortfeasor and the tortfeasor’s private insurer.

The importance of MSA’s in today’s litigation realm

There is no federal rule or statute that requires the creation of MSAs for future medical expenses in third-party personal injury actions. Attorneys and claim representatives need guidance to advise clients and comply with Medicare’s demands. Some commentators believe that MSAs for future medical expenses are required in personal injury actions where the injured party is either a Medicare recipient or is Medicare eligible. Others believe no such requirement exists, reasoning that the federal government has no right to claim an interest in future medical expenses as part of a settlement given the absence of any enforceable regulations. So what is the answer?

When MSAs are required

For a MSA to be appropriate, (1) the plaintiff must be a Medicare beneficiary and (2) it must be determined that plaintiff will incur future care related to the underlying lawsuit or injury which would otherwise be covered by Medicare. If these two requirements above are met, then the parties should determine what amount of the settlement should be allocated to future medical care.

According to the Garretson Resolution Group (GSG), we now have some clarity about what the federal government considers material when it comes to future medical expenses under the MSPA. GSG, a neutral private provider of services to parties settling personal injury claims involving MSA and MSA custodial account services, has recently published a guide on how to handle future medicals in 2016 and under the MSP Statute. The 20-page guide lays out what GSG considers to be the “best practices” on the future medicals issue today. GSG explains the best practice is to (1) identify whether the amount of compensation from the primary plan exists within the settlement award, (2) identify the exact amount of compensation for future medical expenses, and (3) ensure Medicare is not billed until that amount is exhausted.

Arguments for and against establishing these accounts for future medical expenses

For MSAs

At present, there is a heated debate among practitioners over whether MSA’s are even required. Federal law explicitly states that if dealing with a recovery in a personal injury case, the interest of Medicare must be considered. (42 U.S.C. §1395y(b)(2)) By setting up MSAs, parties will avoid costly penalties if Medicare determines the parties improperly billed Medicare, including double damages in a claim by the U.S. for recovery of conditional payments, as well as a debt collection action by the Department of Treasury. MS’s are cost effective, are easily accessible, and bring finality to the liability claim. They are not required by law, but it is a reasonable approach that parties can adopt to protect themselves from MSP liability. As noted, if MSA accounts are not set up but should have been, the attorney may face fines of $1000 per day, per claim. (See “When to Use a Liability Medicare Set-Aside Arrangement (LMSA) by Roy A. Franco”)

Against MSAs

As noted above, there is no federal regulation nor does the United States Code specifically require that MSA fund be created. The federal regulations dealing with Medicare as a secondary payer to post-settlement medical expenses apply only to workers’ compensation cases. Medicare does not currently have an established policy or procedure in effect for reviewing or providing an opinion regarding the adequacy of the future medical aspect of a liability settlement or recovery of future medical expenses incurred in liability cases.

Based on CMS’s policy memoranda and recent case law, there seems to be a distinction being drawn between cases that require a MSA and those that do not. MSAs are not required where (1) the claimant is being compensated only for past medical expenses, and future medical expenses are not at issue; and (2) the claimant is not receiving Medicare, nor is expected to do so in the near future. Those against MSAs argue that a requirement to have personal injury settlements specifically apportion future medical expenses would prove burdensome to the settlement process and, in turn, discourage personal injury settlements. Medicare may refuse to pay future medical expenses related to the claim for which a responsible reporting entity has already assumed liability. Some believe that MSAs increase cost of the claim; however, MSA supporters remind those who oppose MSAs that the Medicare Set Aside comprises a portion of the settlement amount, and therefore there are no increased costs.

While no regulation or statute currently requires the creation of a MSA for future medical expenses in a third-party injury settlement, given the current trends as discussed in this article, it would seem prudent to create a MSA in any case that involves a reasonable likelihood of future injury-related medical care arising out of the underlying events covered by the settlement. The wise practitioner or claim professional should make this part of his or her settlement “checklist” in personal injury cases.

At Maya Murphy, P.C., our personal injury attorneys are dedicated to achieving the best results for individuals and their family members and loved ones whose daily lives have been disrupted by injury, whether caused by a motor vehicle or pedestrian accident, a slip and fall, medical malpractice, a defective product, or otherwise. Our attorneys are not afraid to aggressively pursue and litigate cases and have extensive experience litigating personal injury matters in both state and federal courts, and always with regard to the unique circumstances of our client and the injury he or she has sustained.

Source: ClaimsJournal